Saudi Arabia

Saudi Arabia country brief

Overview

The Kingdom of Saudi Arabia is the largest Arab country of the Middle East. It is bordered by Jordan and Iraq on the north and northeast, Kuwait, Qatar, Bahrain and the United Arab Emirates on the east, Oman on the southeast, and Yemen on the south.

The origins of Saudi Arabia go back as far as 1744 with the establishment of the first Saudi State. The formation of the current Kingdom began in 1902, when Abdul-Aziz bin Saud captured the Al-Saud's ancestral home of Riyadh, and culminated in 1932 with the proclamation and recognition of the Kingdom of Saudi Arabia.

Political Overview

Saudi Arabia is a traditional monarchy. King Salman succeeded to the throne on 23 January 2015, following the death of his brother, the late King Abdullah. The King is assisted by a Council of Ministers that he appoints. In recent years the consultative Shura Council, which consists of 150 individuals appointed by the King, has developed a modest but increasing role in public debate. Municipal elections were held in 2005, and a second round held in 2011.

Saudi Arabia is a member of the Gulf Cooperation Council (GCC). It is a member of the Arab League, the Organization of Islamic Cooperation (OIC), the G20, the United Nations, World Trade Organization (WTO) and Organization of Petroleum Exporting Countries (OPEC).

Bilateral Relations

Australia and Saudi Arabia enjoy a friendly and substantive relationship. This is underpinned by commercial ties and supported by shared membership in the G20 as well as Australia’s engagement with the Gulf Cooperation Council and Organization of Islamic Cooperation, which are both headquartered in Saudi Arabia. People-to-people contacts are also an important aspect of the relationship, with over 10,400 Saudi enrolments at Australian education institutions in 2014.

Saudi Arabia is Australia’s second largest trading partner in the Middle East region. There is significant potential for economic ties to grow, given areas of complementarity in agriculture, education and construction. The establishment of the Australia Saudi Business Council in 2013 also supports the promotion of bilateral business ties.

Economic Overview

With a population of around 27 million and nearly 20 per cent of the world's conventional oil reserves, Saudi Arabia is the Middle East's largest economy. While the private, non-oil sector's contribution to GDP has increased over the past decade, oil and oil derivatives still account for around 90 per cent of Saudi export earnings and government revenues, and about 30 per cent of GDP. The decline in oil prices is expected to negatively impact Saudi Arabia’s current account balance in 2015.

The Kingdom's economy weathered global economic turmoil better than most countries, maintaining GDP growth. Real GDP growth in 2014 was 3.6 per cent, according to the IMF. The growing economy has been matched by an increase in demand for imports, driven largely by massive construction projects.

The Saudi Government initiated structural reform measures in the 1990s designed to encourage privatisation, liberalise foreign trade and reform investment regimes. Commercial laws were revised and initial steps were taken to free up foreign investment and privatise parts of the state sector. This agenda continues, with a focus on economic diversity and privatisation. Education and skills development are a major focus for the government, as the policy of ‘Saudisation’ looks to increase the percentage of Saudi citizens working in the private sector. The approximately $5 billion King Abdullah Scholarship Program (KASP), launched in 2005, funds over 185,000 young Saudis to undertake tertiary studies abroad. The KASP was renewed for another five years to 2019. Australia is an approved destination for Saudi students under the KASP. The Saudi Government spent approximately $500 million on supporting Saudi students and their families in Australia in 2014. The Saudi Government is also engaged in a major program for the construction of educational institutions in Saudi Arabia.

Trade and Investment

As Australia's second largest market in the Middle East, Saudi Arabia is an important trading partner for Australia. In 2014, the total two-way merchandise and services trade totaled more than $3 billion. Of this two-way trade, Australia's merchandise exports to Saudi Arabia amounted to $2.263 billion. Passenger motor vehicles were Australia’s largest commodity export to Saudi Arabia, worth $748 million in 2014. Other major exports were beef, meat (excluding beef) and barley.

Saudi Arabia is also a substantial market for wheat, dairy products, vehicle parts and accessories and vegetables.

Services’ exports, notably education, are also significant. A large number of Saudi tertiary students study in Australia, mostly under the KASP. In 2014, there were more than 10,400 Saudi enrolments in Australian educational institutions, with Saudi students representing the largest contingent from the Middle East region.

Australia-Saudi business ties have expanded. The March 2013 Joint Ministerial Commission meeting saw the signing of a MoU between the Australia Saudi Business Council and the Council of Saudi Chambers of Commerce establishing the Australia Saudi Joint Business Council. The establishment of the Saudi-based chapter, the Saudi-Australian Business Council, was formally approved in July 2014.

Saudi Arabia's needs are well suited to Australian capabilities. Saudi Arabia has a sound economy with a fast-growing and young population, a well-managed banking system, good infrastructure, and generally low import duties and barriers. Its business community is sophisticated and familiar with Western practices. Austrade is represented in both Riyadh and Jeddah.

High level visits

April 2015: Minister for Trade and Investment, the Hon Andrew Robb MP, visited Riyadh to promote Australia’s trade and investment links with Saudi Arabia. He also supported 29 Australian education institutions exhibiting at the annual International Exhibition and Conference on Higher Education.

January 2015: Governor General His Excellency General the Honourable Sir Peter Cosgrove AK MC (Retd) visited Saudi Arabia. He conveyed the condolences of the Government and people of Australia to the Royal Court of the Kingdom of Saudi Arabia following the death of King Abdullah bin Abdulaziz Al Saud.

November 2014: King Salman, in his former role as Crown Prince, attended the G20 Leaders’ Summit in Brisbane. His delegation included Minister of Finance Dr Ibrahim bin Abdulaziz Al-Assaf, then-Minister of Culture and Information Dr Abdulaziz Khojah; then-Minister of State Prince Mohammad bin Salman bin Abdulaziz; Minister of State for Foreign Affairs Dr Nizar Obaid Madani and Central Bank Governor Mubarak.

April 2014: Minister for Trade and Investment, the Hon Andrew Robb MP, visited Saudi Arabia. Minister Robb promoted Australia’s trade and investment links with Saudi Arabia, and supported 27 Australian education institutions exhibiting at the annual International Exhibition and Conference on Higher Education.

April 2014: Minister for Agriculture, the Hon Barnaby Joyce MP, visited Saudi Arabia on his first overseas ministerial visit. Minister Joyce discussed Australia’s agricultural relationship with Saudi Arabia. He was accompanied by a delegation of Australian agriculture and food industry representatives.